Despite the much-lauded studies that showed Silicon Valley has grown a conscience, corporate giving has not kept pace with corporate profits--or the valley's skyrocketing cost of living

By Michelle Goldberg

IT'S THE DAY BEFORE Thanksgiving on the east side of the richest area in the world. A line of families snakes through a church parking lot waiting with glum, resigned faces for paper bags containing turkeys, canned cranberry sauce, generic sandwich cookies and other holiday foods. Seventy-two-year-old Gwen Peters, the tiny, bustling woman in charge of San Jose Neighbors That Care, is relieved that a last-minute shipment from the Second Harvest Food Bank means no one will have to leave without a bird for tomorrow's dinner.

All the same, for Peters, like those heading many grassroots San Jose nonprofits, the famed prosperity in the area hasn't made their jobs any easier. Somehow, Silicon Valley's boomtown riches haven't filtered down to Peters' all-volunteer charity, even as skyrocketing rents have made people increasingly desperate for her services. Donations are down 20 percent, she says. This year, San Jose Neighbors That Care took in a mere $50,000 compared to $70,000 in 1998. Peters and the charity's other volunteers stretched it to distribute food to 17,000 people, buy new coats for 500 kids and new shoes for 765.

Peters herself is raising a 4-year-old girl, Veronica, whose mother gave birth while serving a prison sentence and is still unable to care for her, and Peters is hoping to establish a trust fund to provide for Veronica's future. But even Peters' commitment is no match for the ever-growing needs of the poor in the most economically stratified region in the country. While nonprofits are certainly receiving more high-tech money than they used to get, they're definitely not getting enough to deal with all the fallout from the new economy.

Giving Back the Silicon Valley Way

IN THE PAST FEW YEARS, a number of reports and articles have attempted to topple Silicon Valley's long-held reputation for stinginess. A pre-holiday November 1998 report on philanthropy in the valley by the Silicon Valley Community Foundation happily concluded that Silicon Valley residents give as much or more to charity as those in other parts of the country and that corporate giving is actually on the rise. "Those who contribute to charity in Silicon Valley give an average of 2.1 percent of their incomes compared to 2.2 percent nationally, a statistically insignificant difference," said the report, "Giving Back the Silicon Valley Way." "There is also no significant difference from the national averages at any income level." When the tech titans bailed out the United Way last year, many declared that Silicon Valley had finally gotten a conscience.

But behind this good news is the troubling reality of local nonprofits struggling to take care of the increasing numbers of people left behind by the area's radical growth. And Silicon Valley tycoons are not quite as generous as the report initially suggests. In its final analysis, the report concedes that corporate giving simply hasn't kept pace with astronomical increases in corporate profits. As Kristen Philipkoski reported in Wired News, only two Silicon Valley companies--Intel and Hewlett-Packard--were included on Worth magazine's recent list of the top 50 corporate donors. No Silicon Valley company made American Benefactor's 1998 list of "America's 25 Most Generous Companies." Additionally, corporate employee service on nonprofit boards fell 13 percent between 1994 and 1997, and some charities report that in the context of boom-time 12-hour workdays, they now have to struggle to find people who can sit on their boards. Nor are rich individuals picking up the corporate slack--according to the Community Foundation report, one-third of households that earn more than $100,000 a year give $1,000 or less each year to charity, and 45 percent of the area's richest donors give only $2,000 or less annually.

Meanwhile, as rents have skyrocketed, the demand on homeless shelters and food banks has increased significantly. Maury Kendall, communications manager for the Emergency Housing Consortium, the area's largest shelter operator, says that life has gotten much harder for the poor in Silicon Valley, and increased funding has barely kept pace with increased need. "The impact of the valley's transformation into a breeding ground for dotcom millionaires has been severe on the working classes," he says. "Homelessness-related charities are probably feeling the impact of Silicon Valley growth more than any others." EHC shelters are seeing more families than ever before, Kendall says, and it can't meet the need. Between six and 10 families have to be turned away each week, and there are 125 families on the waiting list for one temporary housing program that has just 10 places. "The shocking increase in the number of homeless families in the last five years has been almost exclusively due to the rise in the cost of housing," Kendall says.

Jan Bernstein, community relations manager for InnVision homeless shelters, is seeing the same situation. "The flip side to the economic good times is that everything gets more expensive," she says. "For InnVision we've seen our numbers [of clients] go up, because wages at the low end of scale have not gone up to match housing." A joint 1998 report by Working Partnerships USA and the Economic Policy Institute shows what Bernstein is talking about. According to "Growing Together or Drifting Apart? A Status Report on Social and Economic Well-Being in Silicon Valley," "Wages for the bottom 25 percent of the workforce have actually declined by more than 13 percent in inflation-adjusted terms since 1989." At the same time, the report says, average rents have increased 28 percent in the last four years.

"The good news is that people have money to give and that some are starting to look at what they can do, but it certainly hasn't kept pace with the rate of economic growth," Bernstein says. This summer, InnVision had to cut hours at the Commercial Street Inn, an emergency shelter for homeless women and children, because of a funding shortage--they've only recently restored them in time for the cold weather. "It seems that if there's any place that we can solve these problems, it should be here," Bernstein says.

Some people in Silicon Valley are even going hungry. "The food banks are seeing people more times a month," says George Manalo-LeClaire, senior policy analyst at California Food Policy Advocates. Many families spend their entire income on rent, says Manalo-LeClaire, and "food stamps last two weeks at the most. Then they've got nothing for that month, so they're relying on food banks, and the food banks just can't provide. We can bet that in Santa Clara County, 4 percent of people are experiencing the physical pains of hunger." According to Second Harvest, the area's largest food bank, the average family seeking emergency food spends nearly 70 percent of their income on housing.

Photograph by George Sakkestad

Who's Naughty and Nice: Gwen Peters of San Jose Neighbors That Care stands by toys and food donated for the holiday season, but the level has been less than what many agencies hoped for.

Trickle-Down Trickery

IF THE RICHEST AREA in the world is reasonably generous, how can that be? One answer is that while a lot of money--$49 million in 1997, according to the Community Foundation--is being given away in San Jose, changing patterns of foundation giving and entrenched entrepreneurial values sometimes prevent the money from reaching the people who need it most. In a Dec. 12 front-page story headlined "Prosperity Yields a Lag in Charity Towards the Poor," New York Times reporter Peter T. Kilborn wrote that while overall donations are up 11 percent nationally since last year, about 90 percent of the money goes to "religious organizations, some of which operate services for the poor, and to other organizations that cater mostly to the rich and the middle class like the opera, ballet, museums and universities." Kilborn reported that according to Giving USA, an organization that tracks philanthropy, contributions to traditional human services charities represented just 9.2 percent of all giving last year, down from 13.9 percent in 1970.

Tech millionaires that get involved in philanthropy tend to focus their money on education and job-training programs rather than old-fashioned charity--they want to tackle problems that they can fix. The buzzword is "venture philanthropy," a form of giving that's modeled on venture capitalism. "The culture in this valley is one of results. I think people have high expectations and high standards," says Carol Welsh Gray, director of the Center for Venture Philanthropy in San Jose. "They want to know what the return on their investment is. They expect accountability for the results process the same way they would in their work. They want their philanthropy to line up with their values in the same way as in their work." As a 1998 San Francisco Examiner story put it, "Across the board, U.S. companies want more bang for their community relations buck--and expect their charity programs to live up to their own business standards of efficiency and results."

The first effort of the Center for Venture Philanthropy, for example, is the Assets for All Alliance, which Gray describes as a "five-year plan to invest in low-income families and help them develop the goals of college education, starting or managing a business, starting a retirement fund or buying a home." Enrollees attend money management classes and are required to deposit a certain amount in a savings account every month. The program provides double matching funds. "If Jose puts away $20, $40 goes into a parallel account that goes toward their goal, up to a maximum of $6,000," Gray explains. If Jose misses too many payments, though, he's dropped from the program and the money in the parallel account goes back into the program.

This philosophy helps explain why charities that serve people with little prospect for social advancement aren't benefiting from Silicon Valley's economic windfall. Wanda Alexander, the executive director of Act for Mental Health, an organization that serves developmentally disabled and mentally ill adults, says that hardly any of the area's riches have trickled down to her group. "The problem I see with the money giving is that, while Hewlett-Packard has been wonderful, many companies are very restrictive for what they will give money for," says Alexander, who is also a clinical social worker. "They want to give money for things like education and training, which is understandable in a way. Our problem is that the population we serve, many are people with emotional handicaps or residual mental illness, or who've been in trouble with the courts or with drugs. They can work to a limited extent, but not to the high productivity pace that the valley requires. Ninety-nine percent of our population is at the poverty level or below. We find it difficult to get understanding from mega-corporations that this population needs a way to feel more human."

Like most of the people involved in the nonprofit sector, Alexander doesn't think that people in Silicon Valley are callous or stingy--it's just that the area's hyperkinetic work culture leaves little room for values that run counter to pure capitalism. "Volunteering is down for us," she says. "It's hard to find people who have time to be board members or to work for an agency or the community. We have a younger group on our board, and they're pulled in 10 different directions. They get transferred or move. Companies say they give personnel, but I don't know how you get that accomplished," she says. "It's very tough, because the pace of the valley is so intense that people in the Silicon Valley industries don't have time to think about their own family relationships, so how are they going to think about someone in another income strata?"

Photograph by George Sakkestad

Bowled Over: Mike Perez enjoys a bowl of hot soup at the Julian Street Inn. Workers at local shelters say the number of those in need is soaring because of the high cost of housing.

The Cuteness Factor

MARK OSAKI, director of development at Second Harvest, confirms Alexander's analysis of the trends plaguing small nonprofits. "A lot of foundations are now focusing strictly or primarily on children's needs or education," he says. "Before, a lot of your local charities could always depend on something from a foundation. Nowadays, partly because boards of directors for foundations are trying to increase their impact, foundations are concentrating on two or three areas, and if you don't fall within those criteria you're out of luck."

Giving is up, says Osaki, "but it's much harder for social service agencies to get funding because the funding is becoming so restricted. Those agencies that serve people with mental disabilities, that's where money is needed tremendously, but it's very difficult to find that kind of funding."

This is where the philosophy of venture philanthropy becomes a problem. "It's much easier for us because we have such a direct benefit," Osaki says. "If we get a dollar, we can leverage it to get 13 dollars worth of food." Services for the mentally ill are much more difficult to quantify, though, "so it's much harder to make the case for the programs."

Paulina Borsook, a former Wired contributing editor and the author of the upcoming book Cyberselfish: How the Digital Elite Is Undermining Our Society, Culture, and Values, believes that part of the problem is that the values of business and engineering culture often clash with those of the social service sector. "I wouldn't rate MBAs and geeks as high in empathic imagination. They don't have an understanding of how someone could be in need or socially vulnerable," she says.

"The social investment stuff--on the one hand it's great because it says, 'Let's look at programs that work.' But there's this MBA free-market mentality and engineer we-can-tweak-it mentality which leads to the fantasy that all problems are fixable. If you just throw a copy of Photoshop at a fifth-grader, it will solve all her problems."

Borsook points out one of the biggest problems with philanthropy in the valley is the let-them-eat-microchips idea that computers can solve all the ills of the poor. According to Peter Hero, president of the Community Foundation of Silicon Valley, 48 percent of local corporate giving is in the form of product. What that means is that much of the lauded charitable increases of the last few years stem from companies giving away their old computers, many of them to schools. "If you are a director of a homeless shelter, it's discouraging to see so much corporate giving that is product and so much that goes to support the public school system, which anywhere else in the U.S. is supported adequately by the government," Hero says. "It's another challenge."

The most cynical explanation for companies' propensity to donate product is that they're reaping big tax breaks while developing a new generation of loyal customers. Borsook has a more generous interpretation--she calls it the cat/dead-rat syndrome. "If a cat really loves you, it will give you a dead rat whether you want it or not," she says. "In the same way, geeks will say, 'Let's throw computers at problems--this is what we love, how can you not love it too?' "

Throwing Computers at The Problem

BUT THERE ARE plenty of reasons for nonprofits not to love computers. Despite the promise of opportunity, their clients have found that breaking into the technology sector often isn't enough to get out of poverty. In this brutal housing market, many of the homeless are already gainfully employed, while others are facing obstacles far too great to be surmounted by HTML. "Easily" 40 percent of the people who use the Emergency Housing Consortium already have jobs, Kendall says. "Far too many of them are working what in any other area would be jobs that would create enough income to support housing and a family. You can easily have good computer skills and still be homeless--we have lots of proof of that here."

For example, Tracey Lovett, 34, has been living at an EHC shelter with her 4-year-old son for almost three months, despite the fact that she's been working full time for the past month in accounts payable at QuadraMed, a Silicon Valley company that specializes in software and consulting for the healthcare industry. A smiling, extremely articulate woman in a neat brown turtleneck, she knows Microsoft Word, Excel and Oracle and earns $11.50 an hour plus benefits, easily enough to get out of homelessness in most cities. But she and her boyfriend, who earns $13 an hour at the San Jose Medical Center, haven't been able to find anywhere to live.

"We've been filling out so many applications, but my boyfriend has really yucky credit, and landlords want you to earn three times the rent, so we've been getting rejections," Lovett says. "They judge you on your past. We're telling these people we will even pay double the amount of whatever they want for a deposit on top of the rent, because there are programs that, once you find stable housing, will help you with your security deposit. What more can we do?" The cheapest apartments Lovett has seen are $1,000-a-month one-bedrooms "in the worst, most torn-down apartment complexes San Jose has to offer." Even if she finds a place for around $1,000, she says she'll probably have to rely on food banks to feed herself and her son, at least for a few months.

Sitting with Lovett is her friend Petra Lozano, 23, who's spending her second night at the shelter after being thrown out of her mother's house, where she'd been staying while finalizing a divorce. There was no room in the families' section of the EHC shelter, so she left her 6-year-old daughter at her sister's house and took a bed in the sprawling single-adult shelter, where men and women are separated by nothing more than office dividers. Lozano makes $11 an hour working in accounts payable at Diamond Multimedia (recently bought by S3) and will be starting school in January at San Jose City College, but, like Lovett, she's not sure how she's going to parlay her salary into the $3,000-plus required to secure an apartment. She's been accepted into a temporary housing program in Milpitas, where she and her daughter can stay in a studio for two weeks, "so at least I can give my daughter a Christmas." After that, she's not sure what will happen.

Kendall, of course, doesn't want to dismiss the value of technology-training programs. There are some that work, he says, but only if they have comprehensive job-placement plans that can move people into positions that pay enough to afford the huge deposits and high rents required to live in the area. For example, Kendall lauds Cisco Systems, which is opening a training academy for networking technicians in an Emergency Housing Consortium shelter. "Until now, all these labs have been in high schools, community colleges and technical schools," Kendall says. "The first one not to be in a school is going to be located in Silicon Valley's biggest homeless shelter. It's very cool and it's the way it should be." Of course, such programs require more than just old machines--they require teachers and administrators.

Jeff Goodell, author of the forthcoming book Sunnyvale: The Rise and Fall of a Silicon Valley Family, published an article in Rolling Stone last month about the class divide in Silicon Valley in which he interviewed several workers at high-tech companies who slept in homeless shelters. "There's this engineering hubris that all kinds of problems can be solved on a whiteboard. It's a way of distancing oneself from problems, a way of intellectualizing them. These are really complicated problems. The forces against these people are huge, and they're just not going to be solved by some sort of magic, 'Oh, we'll put a computer in a shelter and everything will be OK.'"

In some cases, Goodell says, old computers can cause nonprofits more problems than they solve. "That whole dumping of old computers on people, it's a nightmare, it doesn't work. There are the complications of setting them up and getting them running. It's that whole sort of silly fantasy that all you do is put a computer in a classroom and kids are measurably smarter. It's really simplistic thinking."

Illustration by Steven DeCinzo

Emotional Rescue

COMPUTER SKILLS classes won't do much good for people like Robert, a middle-aged client of Act for Mental Health. Robert worked as a programmer at Stanford until he was laid off in 1991. He claims to have an IQ of 150, and there's little reason to disbelieve him, but he also has physical and mental problems that have made it impossible for him to find work. "I have 20 years' experience computer programming but no wants to hire me," he says angrily.

At first, he says that his problem is that he doesn't have the right kind of experience for today's companies. "They usually want three or more years' experience putting up commercial shrink-wrapped products, and all my programming is supportive research and that kind of stuff," he says. Laid off during the recession of the early '90s, Robert says that no one was hiring between 1991 and 1993, and by the time economic recovery set in, "no one was willing to hire someone who'd been unemployed two years."

While what Robert says is plausible--Borsook points to the "ruthless age discrimination" in high tech--he also has serious emotional problems that neither computers nor training can solve. "There are agencies that are supposed to help people get jobs despite their disabilities, but none of them have been able to help me," he says. "The California Department of Rehabilitation qualified me for their services, but then they said they couldn't help me. They say I'm too disabled, I don't have enough social skills to work in an office environment." They may have been right. During our interview, he announces several times that he's never had a friend in his entire life. He abruptly asks me for a hug and then accuses me of feeling sorry for him. Even with Silicon Valley's low unemployment rate, it's unlikely that Robert will find work any time soon.

Right now, what he needs isn't a computer--he needs cash. He receives a monthly check from the government, but it was cut a few years ago and now it's not enough to pay his rent. Right now, he survives on credit cards, signing up for as many as he can and then paying the minimum amount each month. Unless someone intervenes he'll eventually become homeless.

People like Robert, who can't easily be integrated into the economy, are precisely the kind of person likely to be overlooked by the new breed of results-oriented Venture Philanthropists. Sometimes, after all, people can't pull themselves up by their bootstraps. They just need to be cared for. Old-fashioned charity may be outmoded, but it did recognize that reality. "I can tell the 50-year-old woman in the wheelchair with a myriad of medical complaints to go get a job, but it would just make her cry," Kendall says. "She's doing the best she can, we're doing the best we can for her. There has to be some provision, some remembrance of every member of the human family."

In Search of the Measurable Result

THAT'S NOT TO SAY that Venture Philanthropy-style programs aren't valuable, just that they only work for those who already have some potential for upward mobility. Assets for All, which currently has 53 people enrolled, certainly has the potential to change lives, but only those who have at least a few assets to start with. One danger of Venture Philanthropy is that, if giving is tied to an organization's success rate, charities may be more likely to serve those most likely to succeed. "We could increase our success rate by only concentrating on the clients most likely to have success," Kendall says. "I think that's our challenge, to stay true to our roots and our mission. Maybe some new nonprofits will come along based simply on a business model with fairly rigid standards of capitalistic thought behind them, but they will always be outnumbered by those of us that just want to work for the social good."

As ACT shows, though, some charities that just want to work for the social good may be left behind in the new order. "For people in business, I don't think the bottom line includes human values or human quality of life," ACT executive director Alexander says. "The bottom line is money. That's a sickness of our culture, that money's the only value. Even ecological things have to be counted in terms of economic value. I don't think it's going to change. You can be righteous and say they owe humanity something, but not with that value system." As that value system spreads more and more into philanthropy, those who serve the poorest of the poor may find they just can't compete.